The Petrodollar Tsunami Is Here

Portfolio.com ^ | 9/24/2007 | Pranay Gupte

[LM_Guy]

Flush with cash as oil prices rise and demand grows, Middle Eastern states are looking to invest in something more lucrative than Treasuries. Abu Dhabi alone has bought into the Carlyle Group and a big Canadian natural-gas company in the last week. More is to come. Much more.

The fact that Abu Dhabi's government-owned Mubadala Development Company could open its vaults and hand over $1.35 billion for 7.5 percent of the U.S.-based Carlyle Group may be newsworthy, but it's not surprising. What may be more surprising is that Mubadala didn't spring for more.

Simply put, Mubadala is the cash camel of the United Arab Emirates, one of the wealthiest of the oil-and-natural-gas-producing members of the 12-nation Organization of Petroleum Exporting Countries.

In the Gulf, there is a saying: Dubai is the emirate with all the flash, but Abu Dhabi—the biggest and richest of the U.A.E.'s seven sheikhdoms—has the cash.

Need more evidence? Look no further than today's headlines: State-owned Abu Dhabi National Energy Co. agreed to buy PrimeWest Energy Trust of Canada for $5 billion in cash and assumed debt. It is the biggest-ever North American takeover by a United Arab Emirates company.

It has the cash because virtually all of the U.A.E.'s crude oil—10 billion barrels of it, representing almost 10 percent of the world's total of proven reserves—and 5.8 billion cubic meters of natural gas lie in Abu Dhabi.

Nearly 92 percent of the country's gas reserves—4 percent of the world's total—are in Abu Dhabi itself and in the Khuff reservoir beneath the offshore oil fields of Umm Shaif and Abu al-Bukhoosh. It ranks among the largest single gas reservoirs in the world.

At the current production rate of some 2 million barrels a day, estimates suggest the U.A.E.'s reserves could last another 150 years.....

[LM_Guy]

The problem is only going to get worse. You might want to learn Arabic or Chineese.

[Greg F]

I think we’d get a huge amount of Arabic government cooperation against terrorists if we started siezing the oil assets of the countries we invade to defray the costs of the war. Let the world scream. They can’t do anything about it.

[Pistolshot]

Exactly. The biggest issue for this election, aside from the borders, is the growing trade deficit and the ability of a nation such as China or some of the ME countries of bankrupting the US over night.

[Red Badger]

All those pictures of dead white guys on green paper have to come back here eventually, in order for them to become worth something to the holder. Just sitting in a vault, they depreciate. Now they are circulating again, thus greasing the engine of the economy................

[Eagles Talon IV]

A cheaper dollar means US assets are cheaper also. There are 2 sides to the currency market, always. At no time in the near future and certainly not while the world is poised waiting for a cataclysmic raghead driven event, will the ultimate currency of choice be other then the dollar.

Trying to earn more on your nations reserves is perfectly understandable but it is meaningless if you cannot get back the principal amount you invested because of some world event beyond your control which causes everyone to dump what they have for the safety of the US dollar.

It is the same as the reason people are willing to give Swiss banks millions of dollars and accept a return of as low as 1% and sometimes less. It’s all about safety.

[SuziQ]

In the 1980's it was the Japanese who were going to rule us all with their wonderful business techniques, and their purchases of real estate here in the US. If energy technology econtinues to advance, the oil producing nations might just find themselves with a glut of oil, which will lower the price, which will lessen their influence in the world.

It comes, it goes.

[Petronski]

[SaxxonWoods]

Thanks, you saved me some typing.

[SuziQ]

Happy to be of assistance! ;o)

[Little Ray]

Last time, we were supposed to learn Japanese.

[ozzymandus]

Don’t panic. Remember when the Japanese were going to buy everything? Same thing now. What are they going to do, drag everything back to Saudi?

[LM_Guy]

Stupid post by you, if you can’t have an intelligent conversation and show some facts or data then stop wasting WWW bandwith !!!

[LM_Guy]

Stupid post by you, if you can’t have an intelligent conversation and show some facts or data then stop wasting WWW bandwith !!!

[Petronski]

[LM_Guy]

Actually the Japanese & Europeans have bought a large chunk of major USA’s industries.

FOREIGN OWNERSHIP OF SELECTED U.S. INDUSTRIES

Industry Percentage Foreign Owned

Sound recording industries 97%
Commodity contracts dealing and brokerage 79%
Motion picture and sound recording industries 75%
Metal ore mining 65%
Motion picture and video industries 64%

Wineries and distilleries 64%
Database, directory, and other publishers 63%
Book publishers 63%
Cement, concrete, lime, and gypsum product 62%
Engine, turbine and power transmission equipment 57%

Rubber product 53%
Nonmetallic mineral product manufacturing 53%
Plastics and rubber products manufacturing 52%
Plastics product 51%
Other insurance related activities 51%

[LM_Guy]

It must be nice to be such a low intelligence person, all you have to put up cartoons instead of having to think & type at the same time !!!

[RightWhale]

A local fuel oil delivery company announced today they are going out of business due to the high price of their product. They are not bankrupt, just closing up shop.

[LM_Guy]

Please help me, I am not sure what you post is implying ?

[Petronski]

The article is absurd melodrama, worthy of nothing more complex than cartoons. Parody and satire are the perfect response.

[RightWhale]

The fuel oil delivery company, Badger Fuel, is going out of business because the high price of oil makes it not worth their while to operate the trucks. 12 people laid off. Others will pick up the slack no doubt, but something must be fundamentally wrong and this should be viewed with caution. Oil heat is very popular in this area, and a huge hit with every fillup now.